Holden closure could be disastrous for Tony Abbott

The Prime Minister must weigh the political and economic consequences of the departure of car manufacturing. And they could be calamitous.

10 December 2013Mark Kenny

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Hockey: 'Either you're here, or you're not'Treasurer Joe Hockey challenges Holden to 'come clean' on its plans for car making in Australia during a fiery question time dominated by the auto maker's future.

What is going on inside the Abbott government regarding Holden? And, for that matter, what's going on in Detroit, where the company's future is to be determined?

Both questions will eventually be answered, but right now it's shadow boxing all round.

A muscular discourse of hard-nosed market rationalism has led to a stream of signals out of Canberra that after decades of taxpayer support the jig is finally up.

No more public money will be found to keep the brand - a virtual byword for Australianness - operating here.

The government, of course, is right about the fact the local automotive industry is slavishly dependent on government assistance.

'Twas ever thus. Indeed, it is a universal complaint. Car makers the world over receive support and protection in one form or another. Australia's car makers, we are told by industry advocates, are actually at the lower end of taxpayer assistance.

Officially, Holden says no decision has been made in Detroit about its Australian arm, but it seems to be a different story leaking out of the city itself.

Government ministers have certainly been briefing to the contrary - assuming they know.

But where does the truth lie?

Labor, the unions and even Holden management believe the Abbott government is posturing in order to minimise the political fallout expected when what it believes is a done deal comes to pass.

Holden strategists suspect the Coalition wants the car maker to pull the pin as soon as possible to put as much distance between the announcement and the South Australian state election it is hoping to win.

Holden does not want to play ball. If it is going, it wants the government's fingerprints prominently on the decision to dissolve.

Holden managing director Mike Devereux played a dead bat at the Productivity Commission hearing in Melbourne on Tuesday, leaving all sides none the wiser on the company's immediate future.

He says no decision has been made in Detroit. Some say he's foxing; some say he's not. Perhaps he does not know.

Tony Abbott has already pre-empted his own Productivity Commission to some extent by declaring there will be no more money for Holden above that already on the table. The question for the Prime Minister is: what are the real economic and political consequences of departure?

This is suddenly anything but an abstract question.

The closure of Holden would prompt the collapse of the components sector, which employs 18,000 Victorians and 6000 South Australians. The supply chain reaches into every state.

It would also lead to Toyota leaving. Toyota's 4200 employees would join the 4500 Holden workers who would have already been tipped onto the dole queue.

Consider the knock-on effects. The two manufacturers spend a combined $2.25 billion on car parts orders in Victoria alone and source another $600 million worth of parts supplies in Adelaide. That would be gone.

The social and economic consequences of the end of this industry could be calamitous.

Dark predictions of state recessions seem credible against these numbers.

With the Abbott government travelling poorly in the polls, albeit nearly three years out from the next election, it is clear the Prime Minister has little political capital.

The collapse of the Australian car industry would use all of it and some.

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